When do I need a financial planner along with a CPA in retirement?


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In retirement, keeping your income steady requires planning since you are not receiving a regular paycheck anymore. While you are receiving a Social Security check, you are also going to start living off the savings that you’ve accumulated during your working years. You don’t want to make a mistake and lose a large portion of these savings to taxes. 

Taxes can change a lot in retirement due to the change in how you are receiving your income. Taxes can also change due to legislation. 

Both a CFP® and a CPA can help you save money and reduce what you pay in taxes in retirement, but they are going to do it in different ways. The best way to make sure you are not paying too much tax in retirement is to work with both a CFP® and a CPA together.

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It is important to plan how you want to approach your Medicare and Social Security sign up dates – once you make a decision, you really can’t take it back!

How does a CPA or Accountant help retirees?

A CPA, or a Certified Public Accountant, is going to help you specifically with filing and preparing taxes every year. 

CPAs are very important because they work with a very precise and specific set of rules and regulations from the IRS. They are experts in this field and their job is to make sure, come tax season, you are minimizing the income tax you pay. 

With all that said, CPAs are tax preparers, meaning they help you with taxes of the past. When you get your taxes prepared by a CPA, they are looking at the previous years taxes. As tax rules do not change retroactively, CPAs are able to be very precise in their work. 

CPAs are not going to give you a tax plan for the future though, and that’s where a CFP® can help.

How does a CFP®, or a Certified Financial Planner professional, help retirees?

A CFP®, or a Certified Financial Planner™ professional, is going to work as a tax planner, meaning they look into the future of your finances and income tax. 

While this is not as precise as the work a CPA does, an experienced Certified Financial Planner™ professional is still going to be able to pretty accurately come up with a tax plan for  5-10 years into the future. This can only be done though if they are regularly monitoring your plan to make appropriate adjustments if any changes in the tax law occur. 

Many aspects of retirement are affected by taxes that you might not have even thought of, including:

-Social Security: Your Social Security is taxed to the extent of your “other taxable income” in any given year. You are in control of when you receive income from your IRAs, 401k, deferred taxable income from annuities, and life insurance. If you take too much in any year, up to 85% of your Social Security check could be taxed. A CFP® can come up with a plan to efficiently distribute your money. 

-Medicare: If you have a higher income, you might be subjected to IRMAA, or the Income Related Monthly Adjustment Amount, which is a surcharge on your Medicare. This can amount to over $10,000 a year.  Many retirees fall into the IRMAA by taking too large of distributions from their taxable accounts. A CFP® can come up with a  plan to distribute your money in a tax efficient way. 

-Long Term Care: Premiums for qualified long-term care insurance policies are tax deductible if they, along with other unreimbursed medical expenses, exceed 10% of the insured’s adjusted gross income. Nursing home and home health-care costs can be a deductible medical expense. 

-IRAs: Roth IRAs, life insurance loans, and savings accounts can be a source of tax free income. If you are interested in lowering your taxable income in retirement, a CFP® can come up with a plan for this. 

It is important to note, not all financial planners are CFPs®, or Certified Financial Planner™ Professionals. A CFP® professional has to take an exam as well as meet multiple requirements to hold the certification.

A CFP® is also required to work at the fiduciary standard, meaning that they have to put the interests of the client first both legally and ethically. Make sure the financial planner you are working with is, if not a CFP®, at least working for you as a fiduciary. 

Most people who want to have a relaxing retirement, especially in regards to their finances, are going to have a long-term financial plan in place that they are following. While it might not go perfectly, having the trusted guidance of a CFP® and a CPA are going to make it go smoothly, especially if these two professionals work together. 

At Cardinal, we have multiple CFP® professionals, and we partner with CPAs to make sure that we know what is going on with our clients finances. If you are interested in learning about our process, fill out the form below or give us a call! 

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